The securitisation, which helps financial institutions and banks to increase cash flows by converting existing loans in their books into securities and sold to investors.

This allows these institutions to provide extra liquidity which could be used for further lending. The securitisation, a new financial concept in the country, is steadily picking up with several leading financial institutions and banks opting for it to create additional cash flows.

HDFC has booked a total capital gains of Rs42.4 million in FY04 compared to Rs142.1 million last year. Despite growing competition from banks, HDFC has continued to grow at an appreciable pace, according leading securities broking firm Enam Securities. While the growth in home loans has been marginally lower than the industry average of above 30 per cent, HDFC still has a much higher asset base compared to its nearest competitor.

However, the group's investments in the growing banking, insurance and mutual funds businesses will help HDFC command higher premium the report said. HDFC, which unveiled its annual results last week, has reported a 24.6 per cent growth in net profit in Q4FY04, driven by higher interest margin on loan portfolio.

There was a 28.6 per cent growth in loan book. Interest margin improved marginally to 2.2 per cent in FY04 compared to 2.15 per cent in FY03. Total disbursements in the fourth quarter stood at Rs43.5 billion, which were 26 per cent higher on YoY basis.

Total loan portfolio grew at 28.6 per cent. However, retail portfolio grew at a lower pace of 24 per cent even as corporate loans grew at 39 per cent.

The average cost of funds fell to 7.77 per cent in FY04, a decline of 192bp over previous year. Average yield on home loans fell to 9.97 per cent, a fall of 187bp. This resulted in 5bp improvement in interest margin in FY04, Enam analysts said.

While gross NPAs stood at Rs2.57 billion (0.89 per cent), total provisioning cover held by HDFC on these NPAs in FY04 stood at Rs3.43 billion, resulting in nil net NPAs and excess provisions of Rs859 million.